Solutions to Rising Healthcare Costs

 

There is no doubt we have a healthcare-spending problem. (see Healthcare Costs Still Rising Despite ObamaCare) ObamaCare was supposed to be the solution – but it has failed miserably. Is there an answer to this problem?

Solution Proposals

Paul Howard and Yevgeniy Feyman, writing for Forbes, offer some possible solutions. Since the biggest sources of healthcare spending are Medicaid and Medicare, these must be addressed first.

Medicaid

Many Republicans favor block grants to the states that place caps on spending but give states flexibility in how they spend their dollars. Even in the blue state of New York, the legislature placed a cap on total Medicaid spending growth, based on the 10 year average of CPI’s medical –inflation rate. In 2001-2010, New York State Medicaid spending grew by an average of 6%; the current cap will keep it around 4%. System transformation is possible, even in a state as hospital dependent as New York.

New York is moving all of its enrollees, including long-term care and dual-eligible populations, into private managed-care plans with capitated payments and quality benchmarks. They received a federal waiver that gives the state increased federal funding – $8 billion in the mid-term – in exchange for larger long term savings. However, the state will bear the risk if its Medicaid reform plan fails to deliver savings.

Some states are offering coverage for low-income residents through private insurance using plans sold on the exchanges supplemented with HSA contributions to help cover the deductibles. These plans may help reduce costs, but will not improve access to doctors unless the fee schedules are better than standard Medicaid. They may, however, encourage beneficiaries to be more responsible about their healthcare dollars.

Medicare

Competitive bidding between plans and fee-for-service could produce significant savings. The Congressional Budget Office (CBO) has produced two estimates of such savings, $69 billion and $275 billion. Savings to seniors and taxpayers would vary based on whether all seniors were transitioned to competitive bidding or only some.

The Medicare Advantage plans currently in use have already demonstrated significant savings over standard Medicare, but ObamaCare has cut back on these popular plans, inexplicably.

Raising the age of eligibility for Medicare is likely to be passed soon. The CBO has estimated that raising the eligibility age to 67 years would save $19 billion by 2023.

Restructuring Medicare FFS benefits to include a unified deductible and more means-testing of premiums would also help, too. It would force CMS and private insurers in Medicare Advantage to do a better job of measuring and paying for value, not volume.

Private Insurance

About 149 million Americans receive their health insurance from their employer. These employers are beginning to shift to defined-contribution approaches instead of the traditional defined-benefit model. They are utilizing tools such as private exchanges, higher-deductible plans, and reference pricing. This places more control of health-insurance dollars and healthcare decisions in the hands of employees. These changes could lower spending costs over the long run.

 

The Healthcare Debate

As the 2016 presidential campaign heats up, it is essential that candidates familiarize themselves with these healthcare spending trends and are knowledgeable about their solutions. Howard and Feyman give some suggestions on how to frame the debate:

  • Acknowledge reality ­– ObamaCare has increased the number of people with health insurance but it has failed to lower the rising costs of treatment. The poor have more insurance and the rich can still afford quality care, but the middle class is staying away from the exchanges – because of the high cost of purchasing insurance and the low value of these high deductible plans.
  • The status quo is unsustainable – If we don’t rein in the spending we won’t have the money to pay for other important budget items like national defense and education. Fundamental reform is a necessity – particularly for healthcare entitlements. The key is to emphasize consumer-directed plans and Health Savings Accounts, thereby offering financial security, along with additional help for poor and elderly Americans.
  • Explain how consumer-focused reforms can benefit everyone – Reforming the health care system can lift all boats by raising wages, lowering health care costs, and improving healthcare outcomes. Routine healthcare services can and must become more affordable and convenient. The Affordable Care Act (ObamaCare) has not delivered what it’s name promised. In fact, it has led to increased consolidation, which means less competition and therefore higher prices and lower quality.

 

Every candidate for the presidency should be able to explain in clear language how they are going to improve this situation – for the sake of all Americans and the sake of the country and its future.

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